Working Paper: NBER ID: w28282
Authors: Timo Boppart; Karl Harmenberg; John Hassler; Per Krusell; Jonna Olsson
Abstract: We formulate an economic time use model and add to it an epidemiological SIR block. In the event of an epidemic, households shift their leisure time from activities with a high degree of social interaction to activities with less, and also choose to work more from home. Our model highlights the different actions taken by young individuals, who are less severely affected by the disease, and by old individuals, who are more vulnerable. We calibrate our model to time use data from ATUS, employment data, epidemiological data, and estimates of the value of a statistical life. There are qualitative as well as quantitative differences between the competitive equilibrium and social planner allocation and, moreover, these depend critically on when a cure arrives. Due to the role played by social activities in people's welfare, simple indicators such as deaths and GDP are insuffcient for judging outcomes in our economy.
Keywords: COVID-19; epidemiological model; economic assessment; social interactions; time use
JEL Codes: E10; I10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| epidemic risk (H12) | economic behavior (D22) |
| epidemic risk (H12) | economic output (E23) |
| social planner's optimal strategy (D51) | reduction in social activity (Z13) |
| expected arrival time of a cure (C41) | effectiveness of optimal strategy (C72) |
| value of a statistical life (J17) | effectiveness of optimal strategy (C72) |
| optimal strategy prioritizes saving lives and leisure utility (D15) | economic output (E23) |
| households substantially reallocate their time in response to the epidemic (D13) | reduction in death toll (J17) |